It’s been about two years since mortgage rates hiked up, slamming the brakes on what had been a historically racy housing market.
But even as the number of sales has turned sharply downward, home prices have broadly continued to tick up nationally, squeezing more affordability from what is already one of the most unaffordable moments in the housing market in decades.
Yet in recent weeks, housing experts have been speculating that the laws of supply and demand may be finally catching up to market conditions. Some are forecasting a correction, or even a crash.
According to Technical Traders strategist Chris Vermeulen, recent trends in new construction look to be a “sign that things are really breaking down.”
What are the odds that these predictions might come true?
When we dig into the data, what’s immediately clear is the housing market is no monolith. Some markets thrive, while others wilt.
Out of the country’s 150 largest metros, 24 are already seeing year-over-year listing price declines as of May. Of those, 13 are also down compared with two years ago.
Might this trickle of descending prices turn into a torrent that pushes America’s entire housing market into official correction territory? To pinpoint the answer, it can help to know where prices are poised to plummet next.
Where prices are poised to fall
We sifted through Realtor.com® housing data among the 150 largest metros, looking for some tried-and-true supply-and-demand metrics that signal prices may soon subside.
We first identified housing markets with the highest growth in the number of homes for sale compared with a year ago, plus lengthening time on the market. We also checked these variables against two years earlier, which is about when the COVID-19 pandemic housing market peaked with soaring demand and record-high prices.
From there, we whittled this list by looking only at metros where listing levels are currently above where they were at the same time in 2019, before the housing market’s rapid shift.
“When inventory rises faster than demand, prices have to adjust eventually,” Realtor.com senior economic analyst Hannah Jones says. “Increasing inventory levels are a sign that the market is starting to balance out.”
In the end, we were left with a handful of markets, with some clear regional trends, where home prices are still rising, but where supply is mounting and buyer demand seems tepid: These are the places where list prices appear fated to fall in the coming months, and if enough dominoes follow, a correction could be in the cards.
Here are the most likely contenders.
Florida
First off, we have to look to the Sunshine State. Florida is a lot of things to a lot of people: a retirement destination, a vacation getaway, a quirky hot spot. What it is right now, from a housing perspective, is teetering—a mixed bag that could be a harbinger of the larger market.
In six of the 15 Florida markets that fall into the 150 largest metros in the U.S., prices are already down year over year. Miami’s median list price is down 8% year over year. Due west from Miami, on the southern tip of the Gulf Coast, is Naples, where the median list price is down 13% compared with this time last year.
But in five more of those metros, we see prices still rising compared with a year ago, but with the market conditions that tell us prices might have to come down to meet buyer demand.
In the Palm Bay-Melbourne-Titusville metro, the number of active listings has more than tripled from around 1,100 in May 2022 to 3,600-plus in May 2024. And the average listing has gone from taking around one month to sell to now taking about seven weeks. Nonetheless, the median price per square foot is still up 5% year over year, and about 3% above where prices were two years ago.
Palm Bay is the metro with the biggest year-over-year price growth that meets our thresholds for growing housing stock and time on the market. But the story is similar in other areas.
In Orlando, the largest Florida metro we identified, the number of homes for sale has also more than tripled in the past two years, with the average time on the market nearly doubling over the same period. Despite these shifts, the median price per square foot is still up, just barely, year over year and flat compared with two years ago, suggesting the market is potentially teetering on the edge of a correction.
We see similar stories in the Pensacola, Ocala, and Deltona metros. In Pensacola, the average time on the market has gone from a little under three weeks two years ago to almost eight weeks now.
Florida’s unique character may make it a natural barometer for the housing market’s swings, Jones explains.
“A lot of these areas, when they’re affordable, they’re highly desirable,” she says, “but as soon as they got unaffordable, they were no longer a great opportunity.”
Texas
That same attitude might also be at play in Texas, where demand has been rising for years, largely due to the state's affordability compared with coastal metros.
Corpus Christi is the metro that tops our list, with the median price per square foot growing 8% over the past year and 14% compared with two years ago—despite the pressure of increasing housing supply and an average time on the market that's grown from about five weeks to nearly 10.
“There’s still the mindset of sellers to think like, ‘Oh, I can just put whatever price and I’ll get it and I’m just going to wait for the right person to come along,’" Hannah Husby, a real estate agent with Keller Williams Coastal Bend in Corpus Christi, says about sellers in this market. "But buyers are just not there at the prices that the sellers want.”
And with the time it takes a home to sell in Corpus Christi stretching out, Husby says, perceptions can cause a feedback loop.
“With more days on market,” she says, “it’s just not as glamorous anymore.”
Husby also notes a shift in buyers' behavior, where they're able to take advantage of these market dynamics.
“As a buyer, when you come up to those homes that have maybe sat a month and you have a seller that’s more willing to work with you, you’re definitely able to keep to a budget that's probably more comfortable and maybe get some concessions, like paying for some closing costs,” she adds.
McAllen, where prices are up 4% year over year, and Killeen, where prices are flat year over year but up 12% compared with two years ago, are the other two Texas markets where listing levels and time on the market seem to indicate a tipping point.
Killeen now has almost twice as many homes for sale as in pre-pandemic times, and almost quadruple the listing levels from two years ago.
These markets might be ready to tip, but others in Texas already have. Austin, of course, is the poster child of a pandemic boomtown going bust. Home prices there shot up during the pandemic, more than just about anywhere else. And now, prices are flat year over year and down 8% compared with the demand peak two years ago.
Denver, CO
No metro on our list has seen the pace of sales slow down more than Denver. Two years ago, the average home took only a jaw-dropping 10 days to sell. Now, the time on the market is almost triple, reaching 29 days in May. But the price per square foot has continued its upward trajectory, with 2% price growth year over year and 5% compared with two years ago.
And after the number of active listings fell by half during the pandemic, it's now just above pre-pandemic levels.
Despite Denver’s historically strong market, it might be on the brink of a correction due to the significant rise in housing stock, as evidenced by a very high rate of seller price reductions.
“In Denver, 57% of homes have a price reduction,” Jones says, noting how far outside the norm that is. “That's crazy.”
1. Corpus Christi, TX
Median list price: $359,975
Number of homes for sale: 2,136 (up 131% from two years ago)
Median days on the market: 69 (up 31 from two years ago)
2. Palm Bay, FL
Median list price: $399,000
Number of homes for sale: 3,647 (up 243% from two years ago)
Median days on the market: 50 (up 21 from two years ago)
3. McAllen, TX
Median list price: $279,000
Number of homes for sale: 2,330 (up 143% from two years ago)
Median days on the market: 64 (up 25 from two years ago)
4. Denver, CO
Median list price: $639,000
Number of homes for sale: 7,539 (up 120% from two years ago)
Median days on the market: 29 (up 19 from two years ago)
5. Deltona, FL
Median list price: $399,900
Number of homes for sale: 5,435 (up 219% from two years ago)
Median days on the market: 62 (up 35 from two years ago)
6. Ocala, FL
Median list price: $306,038
Number of homes for sale: 2,731 (up 239% from two years ago)
Median days on the market: 59 (up 29 from two years ago)
7. Orlando, FL
Median list price: $440,457
Number of homes for sale: 10,087 (up 174% from two years ago)
Median days on the market: 51 (up 24 from two years ago)
